Monday, October 5, 2009

Doing Your Real Estate Homework: The New York Times Rent vs. Buy Calculator

A common question for all first-time home buyers is -- Does it make sense for me to buy or rent?

It’s likely that you’ll receive as many different answers to this question as people you ask it to. The majority of Realtors are going to tell you it’s a great time to buy because interest rates are low and numerous media outlets are reporting that the US is at the tail end of the recession. At the other end of the spectrum, there are people who feel like it never makes sense to buy and that you will always come out ahead financially if you con-tinue to rent. The reality is that determining if it’s a good time to buy requires a full review of the buyer, from their finances to their life goals.

Most first-time home buyers want an easy, non-intrusive way to figure out if it’s the right time for them to buy. Cirios has searched the Web for the best rent vs. buy calculator that combines ease of use with a valuable output.

The one we recommend can be found on The New York Times’ website. The basic form of the calculator only requires 5 inputs (Monthly rent, Home price, Down payment, Mortgage rate and Annual property taxes) to give you a reading on when (if ever) buying is better than renting.

Here are our tips and precautions regarding this calculator which will allow you to get the most out of this web-based tool:

Use a rental rate for a home similar to the home you are looking to purchase. If you input the rent of your one-bedroom apartment and want to see if it makes sense to buy a 3-bedroom home, the calculator will tell you it’s never a good time to buy.

Do not use an annual home price appreciation of more than 3%. At this point, its unreasonable to expect more than 3% annual appreciation.

Use a higher than a 1% increase in annual rent increase/decrease. If you are thinking about buying a home, it is likely that you are looking to upgrade your current living situation. If you don’t buy a home now, over the next 10 years you are very likely to be renting a larger home. As a re-sult, you’ll probably be paying more than just your standard 1% rent increase.

(NOTE: There are advanced settings on the right side of the calculator which allow you to make the calculator more reflective of your personal situation.)

Source: Cirios Trends -- Getting to the Bottom of the Housing Market

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